The Big Four’s role in providing advice on EU tax policy-making is facing criticism over claims their advice cannot be regarded as neutral as they have conflicts of interest because of their involvement with tax avoidance schemes and relationship with large multinationals
Corporate Europe Observatory (CEO), a research and campaign group that is challenging the privileged access and influence enjoyed by corporations and their lobby groups in EU policy making, says Deloitte, EY, KPMG and PwC are ‘the goliaths of the tax planning world’.
In its report, Accounting for Influence, the group stated: ‘Given their role as key players in the tax avoidance industry it is remarkable that the EU and its member state governments consider them legitimate and neutral advisers in policy-making. They are omnipresent in the EU’s policy processes to tackle corporate tax avoidance (despite their vested interest).’
CEO says the Big Four receive ‘tens of millions’ from the European Commission in public procurement contracts each year. The Commission’s tax directorate paid PwC, Deloitte, and EY €7m (£6.1m) in 2014 to carry out studies and analyses in ‘various tax and customs areas’, which CEO claims ‘means the enablers of major tax avoidance are paid for studies that inform the making of tax-avoidance related laws’.
Despite revelations from the LuxLeaks scandal about the role of the Big Four in facilitating corporate tax avoidance, CEO says in January 2018 PwC, Deloitte, and KPMG were awarded €10.5m for studies on ‘taxation and customs issues’. The group claims the EU has ‘no regard to conflicts of interest’ and challenges its hiring of tax advisers to give input on tax measures such as transfer pricing when they are advising clients in this area.
The report also claims the Big Four have driving seats in various lobby associations trying to influence EU policy responses to tax avoidance, citing the European Business Initiative on Taxation which has members like BP, Pfizer, and Airbus and is run by PwC.
CEO says Accountancy Europe has a board ‘packed with Big Four figures’ with PwC chairing its tax policy group, as well as the tax committee of the American Chamber of Commerce. It describes the European Contact Group, originally set up at the Commission’s request to help with ‘shaping the regulatory environment’ as an ‘informal’ grouping of the Big Four and the next two largest accountancy firms.
It is also unhappy about the Big Four’s involvement with the Commission’s advisory groups such as the joint transfer pricing forum and the platform for tax good governance.
In addition CEO is critical of what it calls ‘a normalised revolving door’ between the Big Four and the EU administration in terms of roles.
The report stated: ‘Decisionmakers do not recognise that this constant staff-swap between firms that sell tax-avoidance, and the institutions responsible for tackling it, might breed conflicts of interest, and weaken the impetus for public interest regulation.’
The report concluded: ‘It is time to kick the Big Four and other players in the tax avoidance industry out of EU antitax avoidance policy. This must start with recognition of the conflict of interest in allowing tax intermediaries to advise on tackling tax avoidance. Only then can an effective framework emerge which ensures public-interest tax policy-making is protected from vested interests.’
In response to the report, the Commission said in a statement: ‘We are surprised this is even a story. The commission regularly asks for research from consultancies all over the world. These are just four out of thousands of companies carrying out studies for us.’
Report by Pat Sweet